Biotech Stocks On The Move

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Many biotech stocks don’t trade on earnings (they don’t have any) but on expectations for future earnings potential. With ASCO right around the corner, we are starting to see some biotech stocks perking up on speculation of good news coming out of the conference. Also keep in mind that the biotech ETF, IBB is at a pivotal level right below its 200dma and if it manages to break out, we are likely to see numerous good trading opportunities in the sector.

Some stocks to keep on your watch list: BLUE, CRSP, QURE, AGIO, ONCE, NTLA, IMMU, CLSD, etc.

Disclaimer: everything on this website is for informational and educational purposes only. The ideas presented are not recommendations to buy or sell stocks. The material presented here might not take into account your specific investment objectives. I may or I may not own some of the securities mentioned. Consult your investment advisor before acting on any of the information provided here.

Momentum Monday – Bull Markets Correct Through Sector Rotation

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The recent rally in interest rates is redrawing the market map. While emerging markets and high-yield stocks are struggling, the U.S. small-cap index broke out to new all-time highs. We continue to trade in a market of stocks environment, where stock picking makes all the difference. We cover stocks like NFLX, BABA, MU, TWTR, and many others.

Disclaimer: everything on this website is for informational and educational purposes only. The ideas presented are not recommendations to buy or sell stocks. The material presented here might not take into account your specific investment objectives. I may or I may not own some of the securities mentioned. Consult your investment advisor before acting on any of the information provided here.

Solar Stocks Are Showing Relative Strength on A Weak Day

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Being up when almost everything is up is not a big deal. But being up when the majority of the market is down is something to pay attention to. This is exactly the current situation of many solar names.

I have little doubt that a lot of solar’s recent strength is related to the rise in crude oil, but the sector has other catalysts going for it. Last week, California announced that starting 2020 every new building needs to have a solar roof. The solar sector rallied hard on the news. The last few days were spent in a sideways consolidation, which is a sign of accumulation.

Both FSLR and SPWR are currently looking constructive on multiple time frames.

Disclaimer: everything on this website is for informational and educational purposes only. The ideas presented are not recommendations to buy or sell stocks. The material presented here might not take into account your specific investment objectives. I may or I may not own some of the securities mentioned. Consult your investment advisor before acting on any of the information provided here.

Facebook, Tinder, and the Battle for Our Time and Attention

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Last week, Facebook announced that it is officially entering the dating world. The market reaction: shares of Match Group went down 30%. It is clear why FB is making this move. They need more young people to spend more time on their platform. There are two main ways to achieve that: dating and games.

Facebook’s new features are not going to kill Match Groups’ offerings. Tinder is not going anywhere. What has changed is the market perception for MTCH’s future growth potential. Perception is half of the stock price in momentum stocks.

MTCH’s bulls say that Facebook’s news is irrelevant and the market has overreacted because 75% of Tinder’s users don’t use FB to log in. The market is forward-looking. The market will assume that the appearance of a new player like FB will slow down MTCH’s growth. And when your stock is priced to perfection, the slightest wind can topple it.

In stage one of the price history in many momentum stocks, price often runs ahead of fundamentals. Stage two is fundamentals catching up with price. I think we might have entered stage two for MTCH. The market wants to see their earnings growth catching up to the price hype. Don’t forget that MTCH doubled last year.

The process of fundamentals catching up might be already underway. Match Group just reported the best quarter since their IPO. Here’s Tinder’s head of product on some of the numbers:

MTCH might spend the next few quarters building a new base – going sideways in a very wide range. There are better places to allocate your money if you want to participate in the dating industry growth.

One way to do it is the so-called Chinese Tinder, MOMO. After a big earnings gap a few months ago, it has been consolidating through time. It managed to retake its 50-day moving average again this week, which will put it on the radar of many traders.

Disclaimer: everything on this website is for informational and educational purposes only. The ideas presented are not recommendations to buy or sell stocks. The material presented here might not take into account your specific investment objectives. I may or I may not own some of the securities mentioned. Consult your investment advisor before acting on any of the information provided here.

A Dozen Things I Believe About the Stock Market

  1. The stock market is an opportunity machine. Times change, gas prices change, fashion changes, regulations change, but there are always companies that find a way to monetize on an ongoing social and business trend and make their investors rich. The only things that change on Wall Street are the names of the winning and losing stocks.
  2. There is always a silver lining. One company’s rising costs are another company’s rising revenues and the market usually does a good job identifying the winners and the losers. Money never sleeps. There is always a trend somewhere.
  3. Simple is better. Complexity is the enemy of execution, great returns, and good lifestyle.
  4. Trends exist because people tend to underreact to new information; then fear of missing out kicks in, people get anxious and overreact. This creates fantastic opportunities for both momentum and value investors.
  5. The stock market tries to be forward-looking. Sometimes, it is spot on in predicting the future. Sometimes, it even impacts the future. Other times, it ends up very wrong and prices events that will never happen.
  6. Intrinsic value is overrated. In 2018, a rare 1793 penny was auctioned for 300k. You can take this penny and go to the supermarket and you can buy exactly a pennyworth of food there. Or you can tell a good story and auction it for a lot more. Supply and demand, which depend on perceptions and expectations for future gains are often more important than any fundamentals.
  7. Prices change when expectations and perception change; the latter can change for many reasons, including price action.
  8. Early adopters (trendsetters) usually sell early and end up making as much or less money than people who hop on already established trends.
  9. Every trend needs skeptics and doubters; otherwise, there won’t be anyone left to buy.
  10. Buy and hold forever doesn’t work with most individual stocks. Most trends eventually end. Have an exit strategy.
  11. In trading and in life, sometimes being wrong is not a choice, but staying wrong always is. Cut your losses, cut your losses, cut your losses, so you live to fight another day.
  12. There should be a very clear distinction between trading and investing. Long-term investing is essentially a bet on how other people’s perceptions will change over time. It is about answering the question What are the catalysts that will change market’s expectations? Trading is about understanding the constant cycle of range contraction and range expansion, it is about taking asymmetric bets where you risk a little to make a lot, it is about adapting to changing markets.